Banks have stepped on the gas to purge their balance sheets of bad loans. In the last fortnight, State Bank of India, on behalf of itself and other consortium lenders, has put three large loans aggregating to ₹20,769 crore on the block.
India’s largest bank has invited expression of interest from interested investors to acquire 51 per cent stake and management control of three companies.
The companies are — a public listed engineering, procurement and construction company (banks’ loan exposure: ₹6,897 crore); a company operating a 540 MW coal-based power project in Jharkhand (₹2,465 crore); and a public listed 2.51 MTPA integrated steel plant in Jharkhand (₹11,407 crore).
With the Reserve Bank of India and the Finance Ministry encouraging banks to clean up their balance sheet, banks are now willing to effect change in ownership of companies, whose loans have become overdue. The move comes in the backdrop of the RBI setting a March 2017 deadline for the clean-up exercise.
Credit rating agency Crisil recently cautioned that the asset quality problems being faced by public sector banks (PSBs) will remain acute and continue through most of the next fiscal. The resultant impact on profitability and capitalisation can further dent their credit profiles over the medium term.
The agency assessed that significant stress in the corporate loan book of PSBs is expected to result in their weak assets ballooning to ₹7.1 lakh crore by March 31, 2017 (11.3 per cent of total loan book) from around ₹4 lakh crore as on March 31, 2015 (7.2 per cent of loan book).
RK Gupta, Co-Chairman of the Assocham National Council on Banking and Finance, said the stringent measures of close monitoring through early warning signals, timely corrective actions, prompt resolution responses, matching concurrent sacrifices, instant provisioning and unlocking of impaired assets in time will strengthen the banking system.
“A string of strong proactive actions will definitely go a long way in strengthening of banks in general and PSBs in particular…
“Salvaging, retaining and improving the economic value of the stressed assets remain the hallmark of swift measures put in place by the Reserve Bank of India,” said Gupta, who is also the Executive Director of Bank of Maharashtra.